Decision Analysis Task 3 Essay

The cost of replacing the 20 year old manufacturing line is $600,000.00, though it was close to the target efficiency of 80% but is showing signs of deterioration.

If a company decides to help differentiate its branded footwear by offering buyers 500 models/styles to choose from, then company managers should evaluate the merits of trying to reduce the $14 million annual costs for production run setup costs associated with producing 500 models/styles at each plant by

In the same way should be treated cost of $1 million related to dismantlement of the existing manufacturing operation. According to the ASC 420-10-24-14, this cost

There are other footwear’s that provide the same level of comfort and satisfaction such as the shoes designed by Nike, Adidas, Bata etc. as well as sell at a competitive price.

Estimated future medical in the event the installed hardware needs to be removed, although no indication of that at this time ($35,000 - $50,000);

With failure costs some of the costs would be equipment break downs and spills. Our equipment costs 3 million dollars so we don’t want to replace it for at least 10 years. The routine maintenance for the equipment is $500,000 a year. The cost for the spills is a total of $120,000 a year. That includes $50,000 for the training classes on spill prevention and $70,000 for the salary of two new spill prevention workers.

Per a prior contract, a cash payment of $50,000 for equipment previously purchased is due in January. Another payment of $30,000 is due in February. Depreciation on the equipment previously purchased is included in the overhead cost detailed in item 11 below. Also, dividends of $12,000 are to be paid in March.

Estimated machinery life: 3 years (after which there will be zero value for the equipment and no further cost savings)

ML had developed a policy of selling manual machines and renting automatic machines. Manual machines did not cost much, did not require service, and could be modified to attach different fasteners inexpensively. Automatic machines were rented on an annual basis because they would have been more expensive to sell and it provided annual income to ML. However, about 700 of the rented machines were returned each year. During the time that machines were in inventory, ML would modify the machines to attach different fasteners. This was expensive with an average cost per modification of $2000. If all 700 machines were modified during a given year this would have cost $1.4 million per year. It was also industry practice to provide preventative maintenance and

The first alternative is to enter the "weekend" segment of the hiking boot market. As I plug and chug the number for the first alternative, I found that this alternative would not be beneficial to the company. Even though this alternative will increase demand due to its low price strategy but cost for the WX 450 boot is higher than the price charged to retailers. This alternative will give the company a negative gross margin.

The use of substitutes in the footwear industry is very high because of the large number of companies and similar products in the industry. There is a great deal of rivalry and the customers’ bargaining power is high. If the store experiences a large demand for unusual small or large sizes not kept in stock and cannot fill these request within a reasonable time frame customers could stop patronizing the store. If competitors with similar business models locate in the same area this could pose problems for the shoe store. If Johnson’s misjudges the path of current fashion and over stocks shelves with the wrong products, this could cause problems in moving merchandise.

High demand for quality and reduced lead times led the company to a self-sufficiency approach on streamlining its entire value chain from raw hides to finished shoes unlike its major competitors who only designed and marketed their products without in house manufacturing.

Wally Obermeyer (head of Obermeyer, a leading manufacturer of skiwear) wanted to discover a way of determining the best levels of production in order to make production commitments for the upcoming 1993-1994 season. So far, predicting production has been difficult for Wally, as the first more concrete signals of demand do not appear until Obermeyer participates in a trade shoe in Las Vegas, not long before production is due to begin. The products also face a short life cycle and are only ordered once a season. Therefore determining the correct quantities based on the most accurate estimates of demand are necessary, Furthermore, the company’s buying committee have huge disparities in each member’s demand forecasts for the

One time cost of added telephone company supplied hardware and Ring Medical supplied servicing fees: $10,000

During the 1990’s the athletic shoe market was growing at great speed thus attracting investments from big shoe manufactures, who indeed wanted a huge share of pie from a booming market which resulted in more and more new players entering the segment and making the competition even more tougher.